Hilltop Holdings Inc. Announces Financial Results for Fourth Quarter and Full Year 2021

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DALLAS, January 27, 2022--(BUSINESS WIRE)--Hilltop Holdings Inc. (NYSE: HTH) ("Hilltop") today announced financial results for the fourth quarter and full year 2021. Hilltop produced income from continuing operations to common stockholders of $62.2 million, or $0.78 per diluted share, for the fourth quarter of 2021, compared to $112.7 million, or $1.30 per diluted share, for the fourth quarter of 2020. Income from continuing operations to common stockholders for the full year 2021 was $374.5 million, or $4.61 per diluted share, compared to $409.4 million, or $4.58 per diluted share, for the full year 2020. Hilltop’s financial results from continuing operations for the fourth quarter and full year 2021 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income as well as declines in net revenues within the broker-dealer segment’s structured finance business and fixed income services lines, partially offset by improvements in the macroeconomic outlook and resulting beneficial impact on loan expected loss rates within the banking segment.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share, a 25% increase from the prior quarter, payable on February 28, 2022, to all common stockholders of record as of the close of business on February 15, 2022. Additionally, during 2021, Hilltop paid $123.6 million to repurchase approximately 3.63 million shares of its common stock at an average price of $34.01 per share pursuant to the 2021 stock repurchase program. These shares were returned to the pool of authorized but unissued shares of common stock. The Hilltop Board of Directors authorized a new stock repurchase program through January 2023, under which Hilltop may repurchase, in the aggregate, up to $100.0 million of its outstanding common stock.

The COVID-19 pandemic has adversely impacted financial markets and overall economic conditions, and is expected to continue to have implications on our business and operations. The extent of the impact of the pandemic on our operational and financial performance for 2022 is currently uncertain and will depend on certain developments outside of our control, including, among others, the ongoing distribution and effectiveness of vaccines, the emergence of new variants of the virus, government stimulus, the ultimate impact of the pandemic on our customers and clients, and additional, or extended, federal, state and local government orders and regulations that might be imposed in response to the pandemic.

Jeremy B. Ford, President and CEO of Hilltop, said, "I am pleased to announce Hilltop’s 2021 strong performance that represents a second consecutive year of outstanding results. Once again, Hilltop generated consolidated annual pre-tax income above $500 million, return on average assets above 2%, return on average equity above 15% and growth in book value per share above 12%. This exceptional financial performance was primarily the result of strong execution by our talented employees, prudent leadership from our experienced management teams, and a commitment to serve our customers and the communities in which they live. PlainsCapital Bank realized further improvement in the quality of its loan portfolio, while expanding business sourcing efforts and the recruitment of talented lending teams. PrimeLending once again originated nearly $23 billion in mortgages, which is a reflection of a well-tuned platform. For the year, Hilltop Securities produced net revenue of $424 million. While the fourth quarter was challenging, Hilltop Securities has an improved infrastructure and a talented team to drive towards a successful 2022."

Fourth Quarter 2021 Highlights for Hilltop:

  • The reversal of credit losses was $18.6 million during the fourth quarter of 2021, compared to a reversal of credit losses of $5.8 million in the third quarter of 2021;

    • The reversal of credit losses during the fourth quarter of 2021 primarily reflected improvements in both macroeconomic forecast assumptions and credit quality metrics.

  • For the fourth quarter of 2021, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $192.0 million, compared to $297.6 million in the fourth quarter of 2020, a 35.5% decrease;

    • Mortgage loan origination production volume was $5.0 billion during the fourth quarter of 2021, compared to $6.8 billion in the fourth quarter of 2020;

    • Net gains from mortgage loans sold to third parties increased to 362 basis points during the fourth quarter of 2021, compared to 359 basis points in the third quarter of 2021.

  • Hilltop’s consolidated annualized return on average assets and return on average equity for the fourth quarter of 2021 were 1.41% and 9.93%, respectively, compared to 2.83% and 20.56%, respectively, for the fourth quarter of 2020;

  • Hilltop’s book value per common share increased to $31.95 at December 31, 2021, compared to $31.36 at September 30, 2021;

  • Hilltop’s total assets were $18.7 billion and $18.0 billion at December 31, 2021 and September 30, 2021, respectively;

  • Loans1, net of allowance for credit losses, increased to $7.1 billion at December 31, 2021 compared to $6.8 billion at September 30, 2021;

    • Includes supporting our impacted banking clients through funding of over 4,100 loans through both the initial and second rounds of the Paycheck Protection Program, or PPP, with a remaining balance of approximately $78 million as of December 31, 2021, compared to approximately $133 million as of September 30, 2021;

    • Through January 21, 2022, the Small Business Administration, or SBA, had approved approximately 3,600 PPP forgiveness applications from the Bank totaling approximately $833 million, with PPP loans of approximately $7 million currently pending SBA review and approval.

  • Non-performing loans were $51.1 million, or 0.52% of total loans, at December 31, 2021, compared to $62.2 million, or 0.64% of total loans, at September 30, 2021;

  • We further supported our impacted banking clients during 2020 through the approval of COVID-19 related loan modifications of approximately $1.0 billion, and continued such support during 2021, resulting in a portfolio of active deferrals that have not reached the end of their deferral period of approximately $4 million as of December 31, 2021, compared to approximately $17 million in active deferment as of September 30, 2021;

    • While the majority of the portfolio of COVID-19 related loan modifications no longer require deferral, such loans may continue to represent elevated risk; therefore, monitoring of these loans continues.

  • Loans held for sale decreased by 10.9% from September 30, 2021 to $1.9 billion at December 31, 2021;

  • Total deposits were $12.8 billion and $12.1 billion at December 31, 2021 and September 30, 2021, respectively;

  • Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 12.58% and a Common Equity Tier 1 Capital Ratio of 21.22% at December 31, 2021;

  • Hilltop’s consolidated net interest margin4 decreased to 2.44% for the fourth quarter of 2021, compared to 2.53% in the third quarter of 2021;

    • Includes previously deferred interest income of $2.2 million during the fourth quarter of 2021, compared to $4.6 million during the third quarter of 2021, related to PPP loan-related origination fees.

  • For the fourth quarter of 2021, noninterest income from continuing operations was $284.8 million, compared to $447.9 million in the fourth quarter of 2020, a 36.4% decrease;

  • For the fourth quarter 2021, noninterest expense from continuing operations was $322.2 million, compared to $402.3 million in the fourth quarter of 2020, a 19.9% decrease; and

  • Hilltop’s effective tax rate from continuing operations was 24.2% during the fourth quarter of 2021, compared to 25.1% during the same period in 2020.


Discontinued Operations

On June 30, 2020, Hilltop completed the sale of National Lloyds Corporation, or NLC, which comprised the operations of its former insurance segment, for cash proceeds of $154.1 million. During 2020, Hilltop recognized an aggregate gain associated with this transaction of $36.8 million, net of transaction costs. Accordingly, insurance segment results and its assets and liabilities have been presented as discontinued operations. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules promulgated under the Internal Revenue Code.

__________________________

Note: "Consolidated" refers to our consolidated financial position and consolidated results of operations, including discontinued operations and assets and liabilities of discontinued operations.

1

"Loans" reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $733.0 million and $645.6 million at December 31, 2021 and September 30, 2021, respectively.

2

Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period.

3

Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets.

4

Net interest margin is defined as net interest income divided by average interest-earning assets.

Consolidated Financial and Other Information

Consolidated Balance Sheets

December 31,

September 30,

June 30,

March 31,

December 31,

(in 000's)

2021

2021

2021

2021

2020

Cash and due from banks

$

2,823,138

$

2,463,111

$

1,372,818

$

1,564,489

$

1,062,560

Federal funds sold

385

406

387

396

386

Assets segregated for regulatory purposes

221,740

269,506

207,284

273,393

290,357

Securities purchased under agreements to resell

118,262

155,908

202,638

106,342

80,319

Securities:

Trading, at fair value

647,998

609,813

682,483

528,712

694,255

Available for sale, at fair value, net

2,130,568

1,994,183

1,817,807

1,715,406

1,462,205

Held to maturity, at amortized cost, net

267,684

277,419

288,776

300,088

311,944

Equity, at fair value

250

221

193

189

140

3,046,500

2,881,636

2,789,259

2,544,395

2,468,544

Loans held for sale

1,878,190

2,108,878

2,885,458

2,538,986

2,788,386

Loans held for investment, net of unearned income

7,879,904

7,552,926

7,645,227

7,810,657

7,693,141

Allowance for credit losses

(91,352

)

(109,512

)

(115,269

)

(144,499

)

(149,044

)

Loans held for investment, net

7,788,552

7,443,414

7,529,958

7,666,158

7,544,097

Broker-dealer and clearing organization receivables

1,672,946

1,419,652

1,403,447

1,596,817

1,404,727

Premises and equipment, net

204,438

210,026

212,402

213,304

211,595

Operating lease right-of-use assets

112,328

115,942

115,698

101,055

105,757

Mortgage servicing assets

86,990

110,931

124,497

142,125

143,742

Other assets

452,880

526,339

535,536

648,895

555,983

Goodwill

267,447

267,447

267,447

267,447

267,447

Other intangible assets, net

15,284

16,455

17,705

19,035

20,364

Total assets

$

18,689,080

$

17,989,651

$

17,664,534

$

17,682,837

$

16,944,264

Deposits:

Noninterest-bearing

$

4,577,183

$

4,433,148

$

4,231,082

$

4,031,181

$

3,612,384

Interest-bearing

8,240,894

7,699,014

7,502,703

7,701,598

7,629,935

Total deposits

12,818,077

12,132,162

11,733,785

11,732,779

11,242,319

Broker-dealer and clearing organization payables

1,477,300

1,496,923

1,439,620

1,546,227

1,368,373

Short-term borrowings

859,444

747,040

915,919

676,652

695,798

Securities sold, not yet purchased, at fair value

96,586

113,064

132,950

97,055

79,789

Notes payable

387,904

395,804

396,653

401,713

381,987

Operating lease liabilities

130,960

134,296

134,019

120,339

125,450

Junior subordinated debentures

67,012

67,012

67,012

Other liabilities

369,606

468,020

348,200

595,045

632,889

Total liabilities

16,139,877

15,487,309

15,168,158

15,236,822

14,593,617

Common stock

790

790

812

823

822

Additional paid-in capital

1,274,446

1,270,272

1,302,439

1,319,518

1,317,929

Accumulated other comprehensive income (loss)

(10,219

)

367

7,093

3,486

17,763

Retained earnings

1,257,014

1,204,307

1,159,304

1,094,727

986,792

Deferred compensation employee stock trust, net

752

751

754

752

771

Employee stock trust

(115

)

(116

)

(121

)

(121

)

(138

)

Total Hilltop stockholders' equity

2,522,668

2,476,371

2,470,281

2,419,185

2,323,939

Noncontrolling interests

26,535

25,971

26,095

26,830

26,708

Total stockholders' equity

2,549,203

2,502,342

2,496,376

2,446,015

2,350,647

Total liabilities & stockholders' equity

$

18,689,080

$

17,989,651

$

17,664,534

$

17,682,837

$

16,944,264

Three Months Ended

Year Ended

Consolidated Income Statements

December 31,

September 30,

December 31,

December 31,

December 31,

(in 000's, except per share data)

2021

2021

2020

2021

2020

Interest income:

Loans, including fees

$

96,104

$

99,769

$

109,328

$

404,312

$

433,311

Securities borrowed

8,524

8,585

14,445

61,667

51,360

Securities:

Taxable

13,916

12,341

9,845

47,633

48,273

Tax-exempt

2,639

2,687

1,862

9,766

6,698

Other

1,872

1,796

1,381

6,595

6,853

Total interest income

123,055

125,178

136,861

529,973

546,495

Interest expense:

Deposits

4,404

5,303

9,269

23,624

47,040

Securities loaned

6,624

6,519

12,014

50,974

42,816

Short-term borrowings

2,279

2,400

2,154

9,065

11,611

Notes payable

5,871

5,465

4,807

21,386

15,897

Junior subordinated debentures

419

609

1,558

2,772

Other

(417

)

(18

)

636

384

2,193

Total interest expense

18,761

20,088

29,489

106,991

122,329

Net interest income

104,294

105,090

107,372

422,982

...

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